"A recent study showed that 55% of global consumers want to pay even more for products that are socially and environmentally responsible."

1. An interview with
Transform to the power of digital
Navi Radjou
Innovation and leadership advisor; Fellow at Judge
Business School, University of Cambridgege
Frugal Innovation:
Innovating More with Less

2. Firstly, it is extremely expensive. The
world’s leading companies spend over
$650 billion on R&D every year. In an
economic environment that is not
very growth-oriented, it is very hard
for companies to sustain that level of
investment. There are also obvious
concerns over generating the right
return on this investment. Studies
suggest that more than 85% of new
product launches in the consumer
products industry fail in the market. It is
leading to a situation where companies
get lesser returns even if they spend
more on R&D.
Secondly, mainstream innovation is
rigid and lacks the agility to respond to
big changes in the marketplace such
as new competition. Five years ago,
automakers never thought that Google
could become a carmaker. Today,
Google is building driverless cars. The
innovation engine at large incumbents
has to become more nimble and flexible.
The third kind of shortfall in the existing
innovation practices is that they are
relatively closed and not open enough
to collaborate with external partners.
Organizations believe that they possess,
in-house, all the resources they need to
deal with demand. However, companies
cannot handle all innovation on their
own. They need to look for partners
outside to augment their capabilities.
Frugal Innovation to
Drive the Next Wave of
Growth
Can you introduce us to the
concept of frugal innovation?
Frugal innovation is about creating
high-quality solutions that are simple,
effective, and affordable with limited
resources. It may not address all of
customer needs, may be 80-90%
of them, but it is cost effective, yet of
good quality and sustainable for the
environment.
How did you come up with the
idea of frugal innovation?
We introduced the concept in 2009. My
co-authors and I, at Cambridge University
in England, were doing research on
how Western companies could crack
the emerging markets, which were fast
becoming engines of global growth.
Emerging markets have a lot of resource
constraints. Many of them struggle with
poor infrastructure, access to capital and
natural resources. And yet we noticed that
there are many entrepreneurs – especially
in India and Africa – who are able to
use their limited means to innovate and
create economic and social value for the
communities. They are frugal innovators.
We covered this subject in detail in our first
book – Jugaad Innovation – which came
out in 2012. Jugaad is a Hindi word that
means ‘makeshift’ or ‘make-do’, which is
basically the ability to improvise an effective
solution in a difficult situation.
Navi Radjou
Innovationandleadershipadvisor;FellowatJudge
BusinessSchool,UniversityofCambridge
is rigid and lacks the
agility to respond
to big changes in the
marketplace.
Declining Returns
on R&D is Forcing
Companies to Rethink
their Innovation
Strategy
You have argued that the
mainstream innovation model
adopted by most companies is
broken. Can you elaborate why?
The traditional model is broken because
of a number of reasons.
Companies cannot
handle all innovation
on their own. They need
to look for partners
outside to augment
their capabilities.
Frugal innovation is about
creating high-quality
solutions that are simple,
effective, and affordable
with limited resources.

3. Is the idea of frugal innovation only
relevant for emerging markets or
does it apply to developed nations
as well?
I believe there is a universal appeal to
the concept. Our first book offered
Western multinationals best practices
they can learn from emerging market
entrepreneurs, and companies who
were able to innovate more with fewer
resources. We then spent the last three
years studying frugal innovation in the
Western context. From our findings,
we published a new book called
Frugal Innovation. This book argues
that, since 2008, there is a big shift in
the Western world – consumers have
become increasingly value conscious,
looking for products and services that
deliver more value for less. Secondly,
consumers in the West prefer to buy
products and services from companies
that are socially and environmentally
responsible. A recent study showed
that 55% of global consumers want
to pay even more for products that
are socially and environmentally
responsible. And this number has been
growing. More interestingly, nearly 70%
of future employees want to work for
companies that have this kind of social
and environmental credentials.
Today, consumers would rather opt for a
relatively frugal solution that addresses
their basic needs and represents more
value(s) as well. Frugality is a lifestyle
A recent study showed
that 55% of global
consumers want to pay
even more for products
that are socially and
environmentally
responsible.
Can you give us some examples of
these entrepreneurs in India who
came up with interesting Jugaad
innovations?
Our book offers a couple of very
interesting examples. First is Mansukh
Prajapati, a potter in India who
developed a fridge that is made entirely
of clay. It does not require any electricity,
and it is 100% biodegradable. It uses
the principal of evaporation to cool the
inside of this so-called fridge, and costs
approximately 20–25. It can keep fruits
and vegetable fresh for several days.
It is a great solution for people living in
remote areas who do not get reliable
electricity supply.
Another one is in the area of solar energy.
Harish Hande is an Indian entrepreneur
who founded SELCO, which installs
small solar lanterns in some of the most
remote parts of India with the belief that
even poor people can afford solar energy.
SELCO wants to democratize access to
solar lighting and he has been doing it for
20 years. SELCO employs young locals
in the villages to charge the solar lanterns
in the morning. They then distribute the
lanterns in the village houses and shops
in the evening, so they can use it at night
for reading and—if you are a shopper,
you can use it to sell your goods at night.
In the morning, they collect the lamps
back along with micropayment for the
amount of light they used the evening
before. With this inclusive approach,
SELCO was able to scale out its frugal
solution to over 200,000 households in
rural areas, in some of the most remote
villages in India, while creating many jobs
in local communities.
that connects the need for saving money
while doing the right thing for the society
and environment. This need is growing
especially among young people in the
Western world. These trends have been
forcing Western companies to rethink
their innovation approach to serve frugal
customers in their home markets.
Principles of Frugal
Innovation – Working
within Constraints to
Create More Value
for Customers and
Society
What are the key principles
underpinning Jugaad or frugal
innovation?
The first principle is that you use what
is abundant to create what is scarce.
For instance, you use clay, a widely
available and cheap material, to create
something like a fridge that does not use
electricity. You employ local people and
turn them into your distributors instead
of hiring employees. So, the question
is ‘how do you create more impact
using fewer resources’, the answer: you
don’t create new things, you just piggy
back and leverage what you already
have. Reusing is indeed a sustainable
alternative to “reinventing the wheel”.
I believe there is a
universal appeal to
the concept of frugal
innovation.

4. What does it mean for companies
and what is abundance for
companies?
Abundance lies in the ecosystem.
Companies must take a systemic
approach – instead of operating with the
sense of scarcity and thinking only about
resources under their sole ownership,
they must look at what’s available in the
whole ecosystem that they can access.
For example, today if a company needs
truck capacity, it can approach the
marketplace called FLOOW2. This
is a B2B marketplace that enables
companies to share idle physical assets,
trucks, factory equipment, medical
devices etc. In most cases, the system
has more resources than you think
when you look at it from a single person
or a company perspective.
Which other principles reinforce
frugal innovation?
Using what is abundant to create what is
scarce is our first principle. The second
principle is to engage and iterate.
Instead of wasting time and money
trying to create a perfect solution in
an insular R&D lab, companies must
directly engage customers, identify their
basic needs, quickly produce a good
enough solution, and then iterate i.e.
incrementally improve the solution as the
customers’ needs evolve. This practice
is very frugal in terms of resources as
well as time.
The third key principle is regarding
sustainability. It’s not about Corporate
Social Responsibility (CSR) but how
to make your entire company more
sustainable. We have examples of
companies like Unilever (its CEO, Paul
Polman, wrote the foreword for our
book), which is planning to double its
revenues by 2020 while simultaneously
halving the environmental impact. This
is not just for one product or service.
They are reinventing their core business
model and entire value chain to produce
more, and better, with less.
In the process, companies reuse,
recycle but also up-cycle – creating
more social value as well.
That brings us to the fourth interesting
principle, which is about collaborating
extensively with other companies –
including your rivals – the notion of open
innovation and “coopetition”.
Can you elaborate on the
concept of open innovation?
Take, for example, the French Railway
Company, SNCF. Their focus was on
offering the best possible train services,
but customer demands have evolved.
People want an end-to-end mobility
Instead of operating
with the sense of scarcity
and thinking only about
resources under their sole
ownership, [companies]
must look at what’s
available in the whole
ecosystem that they can
access.
I believe that gradually
we will see companies
sharing their fleet, their
factories as well as their
clients. This is the B2B
version of the sharing
economy, and it is just
taking off.
solution that takes them from point A to
B, irrespective of the modes of transport
they may have to use – cabs, trains and
car-sharing etc. SNCF realized this and
has just launched a service aimed at this
customer need. They’re combining their
services with partners – such as Zipcar
and others – to provide a “door-to-
door” mobility service. They are willing
to share their client with other brands
and companies. They understand that,
by pooling resources together, they can
serve the customer better and more
comprehensively. Another example is
Mars, the chocolate maker. Mars is
sharing its fleet of trucks in Germany
with other companies. They asked
themselves: “if I am not using my assets
all the time, they are sitting idle, I am
basically wasting money. So, why don’t I
share them with other people?” I believe
that gradually we will see companies
sharing their fleet, their factories as well
as their clients. This is the B2B version
of the sharing economy, and it is just
taking off.
Frugal Innovation can
Make Corporations
More Competitive
Can you explain how large
organizations have implemented
the concept of frugal innovation?
Renault is a very good example of a
company that has been at the forefront
of frugal innovation. In 1999, Louis
Schweitzer, the previous CEO of Renault,
set an audacious goal of building a 6,000
Renault is a very good
example of a company
that has been at the
forefront of frugal
innovation.

5. Innovating More with Less
The Traditional Innovation Approach is Broken
Key Principles Underpinning Frugal Innovation
What is Frugal Innovation?
Frugal Innovation in Practice
Expensive and Not
Sustainable
Leading companies
spend over $650
billion on R&D
every year
Renault Kwid – an entry-level
car for the Indian market,
designed in India, with 97% of
its components sourced from
local suppliers.
Entry range cars accounted for
42% of Renault sales volumes in
2014.
SNCF, the French railway
company, combining services
with Zipcar and others to
provide “door-to-door” mobility.
Mansukh Prajapati, an
Indian entrepreneur, invented
MittiCool, a fridge made
100% of clay, 100%
biodegradable, consumes no
electricity and costs roughly
€20–25.
Declining Returns
Over 85% of new
consumer products
launches fail in market
Rigid and Not Open
Enough
Organizations need
external partners to
augment their innovation
capabilities
High-quality solutions that are simple, effective,
affordable and created with limited resources
Use what is Abundant to
Create what is Scarce
For instance, pooling
excess truck capacity
and enabling access to
it through a B2B
marketplace
Engage and Iterate
Identify customers’
basic needs, quickly
produce a good enough
solution, and then
iterate
Sustainability
Reuse, recycle but also
up-cycle – creating
more social value
Open Innovation
Becoming more open
and willing to share
clients with the external
ecosystem
Connects the need for saving money while being
thoughtful for the society and environment

6. the car as something aspirational, like
the car gives you more freedom and
comfort. It is well designed and makes
you feel good. Most companies know
how to market an expensive product
and create a need for it but they do not
know how to create a need for frugal
solutions.
How important is it to change the
culture of a company for ensuring
success with frugal innovation?
I think changing the culture of the
company is absolutely critical. In
Renault today, nobody is challenging
frugal innovation because it has
proven to be successful in Europe
and now in India. So, companies
need to evolve from “doing frugal” to
“thinking frugal” and then finally to
“being frugal”. Our research shows
that it takes approximately 8–10 years
for a company to make the complete
transition, which is a long journey. But,
if you look at companies like Renault, I
think they have proven that if you can
patiently execute the strategy over 10
years, you can become a leader in the
space. I believe more companies have
to realize that frugal innovation is not just
about low cost. It is about combining
four attributes – affordability, quality,
sustainability, and simplicity. It is about
improving people’s quality of life while
preserving our precious planet.
car and gave his engineers the freedom
to handle the how part. That was the first
chapter in the Renault story that led them
tolaunchin2005theLogan–ano-frillsyet
spacious car that used 50% fewer parts
than a typical Renault with a minimalist
design that met high-quality and safety
standards. To capitalize on the demand,
Renault developed an entirely new entry-
level product line under the Dacia brand.
These entry-level vehicles now represent
circa 40% of Renault’s total sales.
The second chapter, being written in
2015, is the launch of Kwid – an entry-
level car produced for the Indian market.
The concept of the car was developed
to a large extent by Indian designers in
Renault-Nissan’s design centers in India
and very much relies on open innovation
and local supplier network. Ninety-
seven percent of the components in
Kwid come through local suppliers.
They involved the suppliers very early on
– right from the design phase. So, the
whole ecosystem was involved from the
beginning until the end, and that is what
allowed Renault to pull it off. Overall,
Kwid is a very cost-effective solution as
it cost them only half as much to take
the car from design to dealers. Most
Western carmakers cannot copy what
Renault is doing because they try to take
the existing cars that are being sold in
Europe or US and ‘de-feature’ them for
local markets in India and China. That
approach does not work. They must
learn to build a frugal car from scratch.
Do you have a view on an
approximate percentage
of companies using frugal
innovation?
If you look at the Fortune 500
companies, I would say roughly 5%
have adopted frugal innovation in a very
aggressive way as they have realized
its strategic importance. Approximately
20% are experimenting with it and the
remaining 75%, I think, have very little
awareness. If we look at Europe only, I
would say there is an equal split across
the three categories. While in Asia, I
would say nearly 90% of the companies
are already using frugal innovation in
some way. The US, however, is lagging
way behind Europe and Asia in adopting
frugal innovation.
Overcoming Obstacles
to Frugal Innovation
What are the main obstacles to
frugal innovation?
There are a few obstacles of course.
The first one is mindset. Frugal
innovation is viewed as an approach
that produces only low-cost output and
not necessarily a good quality product.
The challenge is to convince people
that something simpler with fewer
features can be innovative. Actually, it
is innovative because it brings more
value to customers. So, the difficulty is
to shift the R&D mindset from pushing
more technology to really understanding
customer needs and focus on delivering
value to customers by creating a simpler
solution.
The second challenge is around
marketing. How do you market a frugal
solution as aspirational? I believe Renault
is doing an amazing job in India in terms
of marketing Kwid. They are not talking
about affordability. They are positioning
The challenge is to
convince people that
something simpler with
fewer features can be
innovative. Actually, it
is innovative because
it brings more value to
customers.
I believe more companies
have to realize that frugal
innovation is not just
about low cost. It is about
combining four attributes
– affordability, quality,
sustainability, and
simplicity.

7. Rightshore®
is a trademark belonging to Capgemini
CapgeminiConsultingistheglobalstrategyandtransformation
consulting organization of the Capgemini Group, specializing
in advising and supporting enterprises in significant
transformation, from innovative strategy to execution and with
an unstinting focus on results. With the new digital economy
creating significant disruptions and opportunities, our global
team of over 3,600 talented individuals work with leading
companies and governments to master Digital Transformation,
drawing on our understanding of the digital economy and
our leadership in business transformation and organizational
change.
Find out more at:
http://www.capgemini-consulting.com/
Now with 180,000 people in over 40 countries, Capgemini is
oneoftheworld’sforemostprovidersofconsulting,technology
and outsourcing services. The Group reported 2014 global
revenues of EUR 10.573 billion. Together with its clients,
Capgemini creates and delivers business, technology and
digital solutions that fit their needs, enabling them to achieve
innovation and competitiveness. A deeply multicultural
organization, Capgemini has developed its own way of working,
the Collaborative Business ExperienceTM, and draws on
Rightshore®
, its worldwide delivery model.
Learn more about us
at www.capgemini.com.
About Capgemini
Capgemini Consulting is the strategy and transformation consulting brand of Capgemini Group. The information contained in this document is proprietary.
© 2015 Capgemini. All rights reserved.
Contacts: Didier Bonnet, didier.bonnet@capgemini.com, Jerome Buvat, jerome.buvat@capgemini.com
Innovation and leadership advisor;
Fellow at Judge Business School, University of Cambridge
Navi Radjou is a Fellow at Judge Business School, University of Cambridge and
an innovation advisor based in Silicon Valley. He has served as a member of the
World Economic Forum’s Global Agenda Council on Design Innovation and is a
regular columnist for Harvard Business Review. In 2013, Navi Radjou received the
prestigious “Thinkers50 Innovation Award”, which is given to a management thinker
who is reshaping the way we think about and practise innovation. Navi Radjou is
the co-author of a new book – Frugal Innovation – and co-author of the bestseller
‘Jugaad Innovation’. Capgemini Consulting spoke with Navi Radjou to understand
how enterprises can apply principles of frugal innovation to innovate more with fewer
resources and yet deliver greater customer and social value.
Navi Radjou